Income Tax Severed Letters - 2012-11-07


2012 Ruling 2011-0418711R3 - Related Foreign Entity Financing

CRA Tags
248(10), 15(2.6), 17(15), ITR 4301(c), 245(2), 212(2)(a), 15(1), 17(2), 15(2), 15(2.3), 214(3)(a), 17(1), 80.4(2)

Summaries under s. 15(2.3) and s. 17(5) - Exempt loan or transfer.

Principal Issues:
A. Will 17(1) apply to Canco to impute an income inclusion in respect of a loan it makes?
B. Will 17(2) apply to deem an amount be owing to Canco by another person because Canco made a loan to a related non-resident party?
C. Will 15(2) apply to include an amount of a loan into the income of the related non-resident party?
D. Will 15(2) apply to include an amount equal to the deposits and loans in the income of BCo and ACo, or any member of the Parentco Group?
E. Will subsection 80.4(2) apply to deem a borrower to have received a benefit?
F. Will subsection 245(2) apply to redetermine the tax consequences described in Rulings A to E above?

A. No
B. No
C. No
D. No
E. No

A. Provided the interest rate is equal to or exceeds the amount of interest computed at the rate prescribed by paragraph 4301(c) of the Regulations for the period of the year during which the loan is outstanding, subsection 17(1) will not apply to include an amount in computing Canco's income in respect of a loan made by Canco.
B. 17(2) will not apply since each loan is considered an "exempt loan or transfer" pursuant to subsection 17(15).
C. 15(2) will not apply since the criteria in 15(2.3) are met. Since 15(2) does not apply, paragraph 214(3)(a) and subsection 212(2) do not apply.
D. 15(2) will not apply since the criteria in 15(2.6) are met. Since 15(2) does not apply, paragraph 214(3)(a) and subsection 212(2) do not apply.
E. 80.4(2) will not apply provided the interest for the year on each loan is paid no later than 30 days after the end of the year and the interest charged on each of the loans is at least equal to the prescribed rate of interest. Since 80.4(2) does not apply, subsection 15(9) will not apply to deem there to be a subsection 15(1) benefit, which would via 214(3)(a), trigger withholding under subsection 212(2).
F. The proposed transactions do not result in a misuse or abuse of the provisions of the Income Tax Act.

2012 Ruling 2012-0449941R3 - 95(1) - taxation year

CRA Tags
95(1) "taxation year"

Summary under s. 95(1) - taxation year.

Principal Issues: How is a taxation year determined under the definition provided under subsection 95(1)? Specifically, is the taxation year of the FA and AFAs in question for the purposes of the definition in subsection 95(1) of the Act XXXXXXXXXX, or is it the sale date?


Reasons: Subject to certain exceptions, the taxation year of the foreign affiliate under the subsection 95(1) of the Act is the taxation year of the foreign affiliate under the taxation laws of its country of residence. If the foreign affiliate does not have to report its income to the foreign home jurisdiction, the taxation year will be determined based on the relevant accounting principles of its home jurisdiction and in accordance with its corporate statutes.

2012 Ruling 2012-0439381R3 - Cross-border spin-off butterfly

CRA Tags
55(3.1), 245(2), 55(3)(b)

Summary under s. 55(1) - distribution.

Principal Issues: Spin-off butterfly of assets from a corporation to another.

Position: Favourable rulings given.

Reasons: In compliance with the law and previous positions.

2012 Ruling 2011-0422481R3 - Loss Utilization

CRA Tags
246(1), 245(2), 15(1), 69(11), 112, 20(1)(c)

Principal Issues: Are the proposed amendments to extend the maturity date on the loan as part of the loss utilization arrangement acceptable?

Position: YES

Reasons: meets the technical requirements of the provisions

Technical Interpretation - External

4 October 2012 External T.I. 2012-0439041E5 - Dividend Tax Credit

CRA Tags

Principal Issues: Whether a taxpayer has the discretion to claim only a portion of the dividend tax credit?

Position: No.

Reasons: The use of the words “the total of” in section 121 of the Act supports the conclusion that an individual must claim all of the DTC available for a taxation year or none of the DTC available for the year.

25 September 2012 External T.I. 2012-0463201E5 - medical expenses - sex reassignment surgery

CRA Tags
118.2(2)(g), 118.2(2)(a), 118.2(2.1), 118.2(2)(h)

Principal Issues: Whether the cost of sexual reassignment surgery (and other related surgeries and travel costs) would qualify as a medical expense for purposes of the medical expense tax credit.

Position: Question of fact but likely yes.

Reasons: The requirements of paragraphs 118.2(2)(a), (g) and (h) would have to be met.

24 September 2012 External T.I. 2012-0461521E5 - Adoption in fact and extended meaning of child

CRA Tags
118(1)(b), 251(6), 118.3(2), 252(1)(b)

Principal Issues: 1- Whether a person has been adopted in fact and is "wholly dependent" under paragraph 118(1)(b). 2- Whether a person is a child under the extended meaning of "child".

Position: 1- Question of fact. General comments provided. 2- Question of fact. General comments provided.

Reasons: 1- Question of fact as to whether there has been a de facto adoption. Question of fact whether the person is “wholly dependent” under paragraph 118(1)(b). 2- Paragraph 252(1)(b) requires the person to be “wholly dependent on the taxpayer for support” and for the taxpayer to have “custody and control” of the person. Both requirements are questions of fact.

21 September 2012 External T.I. 2012-0461911E5 - medical expenses - travel outside country

CRA Tags
118.2(2)(a) 118.2(2)(g) 118.2(2)(h)

Principal Issues: Whether medical and travel expenses incurred for surgery outside of the country qualify as medical expenses for purposes of the medical expense tax credit?

Position: Insufficient information provided to determine whether requirements of paragraphs 118.2(2)(a), (g) and (h) are met.

Reasons: The law.

21 September 2012 External T.I. 2012-0462011E5 - medical expenses - drugs

CRA Tags

Principal Issues: Whether medications and other products purchased directly from a naturopath would qualify as medical expenses for purposes of the medical expense tax credit?

Position: Question of fact whether the requirements of paragraph 118.2(2)(n) and Regulations 5700 are met.

Reasons: The law.

20 September 2012 External T.I. 2012-0452411E5 - Manner of filing 98(5)(c) designations

CRA Tags

Summary under s. 98(5).

Principal Issues: What is the manner of filing a paragraph 98(5)(c) election and can it be filed late?

Position: The 98(5)(c) election should be filed with the tax return for the year in which the proprietor receives property from a partnership. A late-filed notification can only be filed late at the discretion of the TSO.

Reasons: Consistent with CRA position and jurisprudence concerning filing requirement for similar notifications.

7 September 2012 External T.I. 2012-0437201E5 - Employers Obligation to Sign T2200

Principal Issues: 1. Whether an employee is entitled to deduct motor vehicle expenses? 2. Is an employer obligated to complete and sign Form T2200 for a particular employee?

Position: 1. & 2. Question of fact.

Reasons: 1. An employee is entitled to deduct motor vehicle expenses incurred in the year for employment travel provided the amounts are reasonable in the circumstances, all conditions of paragraph 8(1)(h.1) of the Act are met (employee must be required to carry on his/her employment duties away from the employer’s place of business, the employee must be required to bear those travel expenses, the employee must not have received a motor vehicle allowance from his/her employer that was not included in income because of paragraph 6(1)(b) of the Act), and the employer has signed Form T2200. 2. An employer must be reasonably certain that an employee meets the conditions before signing Form T2200.

Technical Interpretation - Internal

28 September 2012 Internal T.I. 2011-0427611I7 - NPO Project - XXXXXXXXXX

CRA Tags

Principal Issues: Whether the NPO meets the requirements of paragraph 149(1)(l).

Position: Likely no.

Reasons: Fact specific.

21 September 2012 Internal T.I. 2012-0447401I7 - Minister's ability to reassess under 152(4)

CRA Tags
152(7), 152(4), 152(3.1)

Principal Issues: Can the Minister reassess an amended return that is filed more than 3 years after the original assessment?

Position: No

Reasons: The law specifically states that for a Canadian-controlled private corporation, an assessment, reassessment or additional assessment may only be made before the day that is 3 years after the end of the normal reassessment period.

17 July 2012 Internal T.I. 2011-0421921I7 - Special work site and remote work location

CRA Tags
6(6)(a)(i), 6(6)(a)(ii).

Principal Issues: 1. Are the duties performed by project staff working at the employer’s various project work sites considered “'temporary” for purposes of subparagraph 6(6)(a)(i) of the Act? 2. Are employees working at a particular work site employed at a remote location for purposes of subparagraph 6(6)(a)(ii) of the Act?

Position: Unable to rule as such determinations are a question of fact. The matter was referred to the Trust Accounts Programs Division for their views.

Reasons: In any given situation, each particular location and each employee’s duties and personal circumstances need to be considered on a case-by-case basis in order to determine whether an exemption in subsection 6(6) of the Act has been met.